DAICO : Future of ICOs
A very large part of the cryptocurrency market and the blockchain industry is the ICO sector. The cryptocurrency market and the blockchain industry have a large number of people innovating and coming up with newer and newer products and ways to better the market experience for the community.
The go-to method for fundraising that most startups in the blockchain industry used was the ICO method. They created a website, put up a whitepaper, announced ICO dates and accepted funds from the community. While this was the cryptocurrency market’s alternative to regular capital investments, there are too many loopholes that can be used to propagate a scam.
And for quite a while many people in the blockchain industry took advantage of these loopholes, raised funds and disappeared overnight with the raised funds. With this year’s statistics, the SEC announced that out of all the ICOs that take place 85% of them never launch a token or a product. This has become a major area of concern for all regulatory boards across the globe and the community itself.
As a replacement of the ICO, the founder of Ethereum Vitalik Buterin suggested a method called DAICO. The abbreviation comes from two other words; DAO and ICO. DAO stands for Decentralised Autonomous Organisation and ICO stands for Initial Coin Offering. Put those two together and we get DAICO, which stands for Decentralised Autonomous Initial Coin Offering.
DAICO; Decentralised Autonomous Initial Coin Offering
Vitalik Buterin, the founder of Ethereum, came up with an alternative for the ICO. He named it the DAICO, which is essentially a crossbreed of DAOs and ICOs. The advantage of conducting a DAICO instead of an ICO is in a DAICO, the investor holds all of the cards.
Companies that use DAICOs minimise the risk that the investor has to put themselves and their assets at. Investors in a DAICO have voting rights on the project and can vote to destroy the contract between the investor and the company as and when they find that the development is not up to the mark or not satisfactory.
The investors along with the token are given voting rights and have to contribute as and when the company require their help for different purposes. Basically, DAICO increases the responsibility of the investors at the same time places accountability on the shoulders of the team promising to deliver a functioning product.
One of the most important features of DAICO is that the investors are in direct control and contact with the developers. The DAICO uses something called the TAP mechanism. Which essentially assures the investors total financial control over the developers. Based on the progress that the developer team has made and is planning to make the investors can decide how much of the capital to issue, at what rate and when.
This is one of the most defining differences between DAICOs and ICOs. After an ICO the developers and the team have total access to the contributions and can use them as and when they feel fit, but in a DAICO the contribution once made, is still under the investors’ control and they decide the cash flow into the developer’s coughers based on the progress.
With a more interesting and controlled alternative for the ICO style of fundraising, a company called the Vault has incorporated its own characteristics to create a decentralized platform for DAICOs. Let us take a closer look.
Vault is a DAICO platform launched by Electus Network. Which essentially means it is a two-sided platform on which companies can run their DAICOs and investors can invest in them. It is a platform on which investors will have to take a membership, following which they are open to a world of DAICOs that they could possibly invest in and further.
Vault is based on the DAICO idea of Vitalik Buterin but has made some changes in the process. It has deviated from some of the characteristics of the DAICOs and by the looks of it, it is for the better.
These are the features of the Vault’s DAICOs:
On the Vault platform, for an investor to invest in prospective DAICOs they must first be a member of the community. For a membership, the user must submit to a standard KYC process at the end of which, if everything checks out, the user is added.
A concern that most people in the cryptocurrency community have with membership based sites and communities is the inherent centralisation of the platform. But to sidestep that, the Vault allows all control of funds, wallets and personal details to the users themselves and only uses them for a one-time verification of identity. By doing so, they avoid becoming centralised, but at the same time manage to know and verify the members.
Offers more flexibility
The Vault platform, being a two-sided platform, offers more flexibility to investors and issuers alike. Vitaliks original proposal does not allow for exceptional withdrawals. If a company has to withdraw a large chunk of funds for a one time purpose such as exchange listing, the only way to do this is to increase the tap. This is not good for investors because they can never decrease the tap again due to the design of the DAICO. Vault fixes this by allowing the company to request for an exceptional fund release(XFR) on which people can vote and allow the company to make a one time spend bypassing the tap control.
The second exciting feature for companies is that instead of the tap starting at 0 in the beginning(in the original DAICO proposal), Vault allows companies to set an initial fund release, which sets aside some capital for covering initial fixed costs. This initial fund release is self regulated by the smart contract.
The Vault platform will have a dashboard on which the vitals of the project will be on display at all times for investors to see and get an overall feel for. The dashboard will act as a one-stop control panel for the projects that the investor has invested in and will show them the health, statistics and progress that the project has made.
The DAICO idea is essentially a decentralised form of capital investment. It allows investors control over their contributions and also control over the cash flow into the developer’s hands. By doing so, they also retain the right to destroy the contract as and when they deem fit if the company slacks and all contributions will be returned in the proportion of the initial investment.
This in itself is a huge step up from the illusive ICOs, but the Vault has taken it one step further. It has not only introduced a secondary type of DAICO, but has also made a platform that promises to be user-friendly and more importantly investor-friendly. The Vault is definitely a project and platform to look out for in the long run.
The url of the document is here:https://storage.
“This article does not cover all the features of Vault. To gain a complete understanding, please refer to this document made by Electus.”
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